Why is the U.S. dollar no longer backed by gold?

The gold standard, once a cornerstone of global monetary systems, fell by the wayside due to its inherent volatility. This instability made it difficult for economies to maintain stability and predictability in their financial markets.

Moreover, the gold standard imposed strict constraints on governments, limiting their ability to respond effectively to economic challenges. By maintaining a fixed exchange rate tied to gold, governments found themselves unable to pursue expansionary policies aimed at stimulating economic growth and reducing unemployment during downturns.

The abandonment of the gold standard allowed for greater flexibility in monetary policy, enabling governments to adjust interest rates and other levers to address economic issues as needed. This increased responsiveness helped to stabilize economies and reduce the risk of prolonged recessions.

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